Somalia's Petroleum and Mining Legal Framework
The legal and commercial framework governing petroleum and mining in Somalia involves the separation of powers between key institutions such as the Ministry of Petroleum and the Somali National Oil Company. The Directorate of Minerals/Mining oversees the mining sector, while various regulations and contracts establish the foundations of these industries. Exclusive licenses, royalties, and fiscal terms detail the financial aspects, including government take, bonuses, and community payments.
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LEGAL AND COMMERCIAL FRAMEWORK: SEPARATION OF POWERS Institution Ministry of Petroleum Directorate of Petroleum Role and responsibility Policy Legislation Licensing SONOCoversight The petroleum regulator Technical/HSE compliance and oversight Information / analysis TheSomali Petroleum Directorate/Somali Petroleum Authority (SPA) Somali National Oil Company (SONOC) Commercialoperations Government take/participation Granting PSAs on behalf of Ministry Tax policy Tax collection Ministry of Finance Inland Revenue
DIRECTORATE OF MINERALS/MINING Somali Mining Authority/Directorate The Mining regulator Technical/HSE compliance Information/ Analysis NAMCO Commercial operations Government take/participation Granting rights on behalf of Ministry Ministry of Finance Tax policy Inland revenue department Tax collection Policy Legislation Licensing Oversight on National Mining Company (NAMCO) Somali Geological Survey (SGS) Institutions Institutions - - Ministry Ministry Other institutions Other institutions
FOUNDATIONS OF A PETROLEUM AND MINING SYSTEMS International law Constitution Mining Code 2017 Mining regulations Mining contracts International law Constitution Petroleum Law 2017 Petroleum regulations Petroleum contracts Petroleum Petroleum Mining Mining
Exclusive licenses Signature and production bonuses Royalties PSAs Signature and production bonuses Royalties Risk service contracts Signature and production bonuses All hydrocarbons (subject to take-in-kind right of IOC) Surface rentals Training Community developments Tax, including: oIncome oCapital gains on transfer Surface rentals Training Community developments Tax, including: oIncome (unless included in Gov. share of profit oil) oCapital gains on transfer Possible levies on excess profits Revenues from NOC participation Tax, including: oIncome oCapital gains on transfer Possible levies on excess profits Revenues from NOC participation
THE PETROLEUM FISCAL TERMS OF SOMALIA FEDERAL GOVERNMENT TAKE Participating interest 30% max (negotiable) Signature bonus (per block/PSA) 0.5 M Training fee (per annum) 0.5 M Community payments, E&P 0.5 M Surface rental (pa) for first 3 years, USD 10/Km Surface rentals (pa) for first 2 years, USD 20/Km Surface rentals (pa) for second 2 years USD 30/Km Surface rentals during assessment USD 30/Km Surface rentals during D&P USD 200/Km Royalty 10% (Negotiable)
Cost recovery oil 70% max (cap) Profit sharing, using R-factor: During cost recovery period: R < 1= 15% 1<R>2 (R is between 1 and 2) = During profit oil R > 2= 75% sliding up Depreciation 1 year Uplift 15% Uplift timeframe 5 years Exploration duration: 3+2+2 years Tax included in the Gov Take 0% o o o
MINERAL POTENTIAL OF SOMALIA Federal Member States Puntland Puntland 1. Majiyahan deposit of tantalum (tin), Nb, gold (Au) and silver. 2. Dhurbo coal deposits (Two sites). 3. Qandala lead and silver deposit with zinc, iron and copper. 4. The salts of Hafun and gemstones 1. The sepiolite, bentonite, kaolinite and potash of El Bur 2. The salts, including lithium brines of Hinlabi, Warshuba and Ba ad Weyn 3. Calcrete uranium deposits of Mirig, Wabo, Adado and Galinsor 4. Brown coal (Lignite) and black coal deposit are reported at NW Hobyo 5. Pt, Cu and Au are reported by the Russian researchers Mineral Potential Galmudug Galmudug Hirshabelle Hirshabelle 1. The gypsum of Jiqley 2. The cement-making material(limestone, clay and gypsum) of Jiqley 3. Pt, Cu and Au is reported by Russians on East Bula Burte
1. Primary uranium at AlioGhelle 2. The apatites (phosphorites) of Modu Mode 3. The iron ore of Bur Qalin and Daimir, near Dinsor; in addition to Mn deposit associated with the Fe ore. 4. Granite, marble at Lego near Balli Dogle and gem-stones in the Dooy 5. Rare Earth Elements (REE) in the coastal sand dunes near Marka 6. Coal (black coal) resource at Hawaay, west of Barawe 7. Ag and Au east of Bardhere; and Cu and Phosphorites SW of Dinsor. 8. Kaolinite and silica sand deposits is found in the red/white sands, near Marka 9. Limestone, clay and gypsum for cement at Markabley and Bur Anole, south of Bardhere SW State SW State 1. Fe ore near El Wak (The Russian report) 2. Theblack sand deposits of Kismayo: magnetite, ilmenite, rutile, zircon and monazite 3. Placer gold traces in sand/pebbles on river Juba banks between Bardhere and Luuq 4. Limestone, clay and gypsum for cement at Markabley and Bur Anole, south of Bardhere Jubbaland Jubbaland
1. Piezo-quartz and feldspar pegmatite's and Muscovites in Lafarug and Da ar Buluk. There is potential for Lithium mining. 2. Gold and Pt in Arabsiya, Gabiley, Baki and Borame. 3. Base metal deposits: Cu and Zn 4. Cassiterite-bearing quartz veins in the Inda Ad Series of Sanag 5. Molybdenum, Columbite and beryllium bearing quartz veins and pegmatites in the western part of the Golis Range. 6. Coal and lignite: Coal deposits with ages from Jurassic to Oligocene Mionce occur in Hed-Hed , north of Las Dureh, Southeast of Berbera 7. Gypsum-anhydrite deposit near Berbara 8. Beryl group gemstones, opal, tourmaline, amethyst, quartz, ruby and sapphires. 9. Iguana as fertilisers at the islands of Hiis and Maydh. Somaliland Somaliland (?) (?) 1. Mineralized beach sands Benadir (?) Benadir (?)
LEGAL & REGULATORY FRAMEWORK FOR MINING WORK IN PROGRESS Mining policy Mining Regulation Model Mining Exploration and Development Template Mining Code Review Mining management and revenue sharing
FISCAL / COMMERCIAL TERMS IN MINING Royalty of5% Export tax at 2.0% of net value Surface rents Corporate income tax Minimum work commitment Local community development